Case of Company A v. Company B Regarding a Dispute over Ship Collision Liability

 – Determining Damages from Ship Collision

In maritime navigation, vigilance towards the surrounding environment and proper vessel maneuvering are crucial. A sudden collision left three ships damaged, though fortunately causing no casualties or water pollution. During the trial, the court clarified that neither party applied for an assessment of the losses caused by the collision. How, then, should liability and compensation be attributed?

Case Review

On August 31, 2023, under overcast skies, an accident loomed. At approximately 4:30 PM, Company B's vessel JIA HANG 003 departed from Guangzhou Yihai Wharf toward the Shajiao Anchorage in the Pearl River Estuary to evade an approaching typhoon for the safety of both the crew and cargo. However, the voyage took an unexpected turn.

While entering the 39SJ Anchorage in the Pearl River Estuary, JIA HANG 003 collided with the anchored vessel SHENG YOU 226 owned by Company A. Its propeller became entangled with the right anchor chain of SHENG YOU 226. The huge impact caused JIA HANG 003 to drift uncontrollably southwestward to the 38SJ Anchorage.

The incident escalated when JIA HANG 003, still adrift, struck another anchored vessel, QI DE LONG 968 owned by Company C. In the wake of the two collisions, ripples continued to spread across the surface of the sea. The collisions left JIA HANG 003 with a dented portside bulwark on the main deck and a fractured lifeboat pillar. SHENG YOU 226 suffered deformed bow railings, cracked hull plates, and the loss of its right anchor and seven sections of anchor chain. QI DE LONG 968 sustained multiple scratches on its starboard midship hull. Thankfully, no casualties or environmental contamination occurred as a result.

The maritime authority sent staff to investigate the incident and issued a maritime traffic accident liability determination report on November 28, 2023.

To recover losses, Company A filed a lawsuit with the Guangzhou Maritime Court (GZMC), demanding that Company B compensate RMB 721,761 in total, covering SHENG YOU 226 repair costs (RMB 222,000), replacement of anchor and chain (RMB 81,270), inspection fees (RMB 2,380), travel expenses (RMB 6,180), vessel maintenance costs during repairs (RMB 245,642.20, from September 2, 2023 to September 20, 2023), loss of hire (RMB 164,288.80) plus interest (calculated based on RMB 721,761 from September 1, 2023 until the date of actual compensation payment, at the LPR published by the National Interbank Funding Center).

Company B contested the reasonableness of the amounts and liability for interest claimed by Company A.

After court clarification, both parties waived their right to apply for assessment of the loss arising from the collision and agreed to let the court determine damages based on submitted evidence in accordance with relevant laws and regulations.

The court established the facts as follows: Around 16:33 on August 31, 2023, the vessel JIA HANG 003 owned by Company B collided with the bow of the anchored vessel SHENG YOU 226 owned by Company A, resulting in the entanglement of JIA HANG 003's propeller with the right anchor chain of SHENG YOU 226. At 16:45, the port bow of JIA HANG 003 collided with the starboard midship of the anchored vessel QI DE LONG 968 owned by Company C. On November 28, the maritime authority issued a maritime traffic accident liability determination report, which concluded that JIA HANG 003 failed to adequately consider the impact of the surrounding environment on vessel navigation, lacked proper vigilance during anchoring and turning maneuvers, and mishandled emergency procedures, thereby bearing full responsibility for the accident. SHENG YOU 226 and QI DE LONG 968 were deemed free of liability.

During the repair period of SHENG YOU 226, vessel repair costs, auxiliary costs, maintenance costs, and corresponding loss of hire were incurred.

Court Decision

GZMC rendered a civil judgment on June 20, 2024, as follows: 1. Company B (the defendant) shall compensate Company A (the plaintiff) RMB 500,483.80 plus interest (calculated from September 1, 2023 to the 10th day after the judgment takes effect, at the one-year LPR published by the National Interbank Funding Center). 2. All other claims of Company A are dismissed.

Neither party appealed the first-instance judgment, and it has since taken legal effect.

Rationale of Judgment

The court's effective judgment holds that the accident caused partial damages to SHENG YOU 226, entitling Company A, to claim compensation for the following items: 

I. Vessel Repair and Auxiliary Costs

1. The "Special Service Fee" of RMB 114,068, as set forth in the repair settlement statement provided by the plaintiff, constitutes auxiliary costs necessarily incurred during vessel repairs. The "Bow Structural Repair Costs" of RMB 90,682 pertain to damages caused by the collision, as evidenced by the repair locations and items. The plaintiff has actually paid the total repair costs of RMB 222,000, which represent economic losses directly resulting from the vessel repairs and causally linked to the collision. The plaintiff's claim for compensation of these costs from the defendant is supported by factual and legal grounds, and the court hereby upholds it.

2. The anchor chain replacement cost of RMB 81,270 arose from the loss of the right anchor chain of SHENG YOU 226 due to the collision. This expense constitutes part of the vessel damage, and the plaintiff's claim for this loss is legally justified. The court therefore supports this claim.

3. The vessel inspection fee of RMB 2,380, incurred by the completion of repairs, falls within the scope of auxiliary expenses as defined by the court. Since this expense was actually incurred, the plaintiff's claim for this cost is upheld by the court.

4. The plaintiff failed to provide evidence establishing a causal connection between the claimed travel expenses and the collision. Thus, its claim for travel expenses is dismissed by the court for a lack of legal basis.

II. Maintenance Costs

Based on the established facts, the repair period for SHENG YOU 226 at the shipyard spanned September 9 to September 20, 2023, with dry-docking from September 10 to September 16, 2023. The plaintiff's claim to calculate the repair period from September 2 due to typhoon impacts and the maritime restrictions imposed by the maritime authority lacks evidentiary support and is dismissed by the court.

The plaintiff entered into a repair contract with Company D on September 8, 2023, to prepare for the repair of SHENG YOU 226. The court deems it fair to calculate the repair period for the ship from September 8 to September 20, 2023 (13 days). Maintenance costs during the repair period included:

1. Freshwater and Fuel Expenses

According to SHENG YOU 226's logs, during the repair period from September 8 to September 20, 2023, SHENG YOU 226 consumed 4.48 tons of light oil and 41 tons of freshwater. The cost of light oil during the repair period amounted to RMB 31,808. Based on the freshwater replenishment record of 42 tons on August 22 and the plaintiff's water supply invoice for that day, the freshwater price was calculated at RMB 16.67 per ton, resulting in freshwater expenses of RMB 683.38 during the repair period. The total combined costs for light oil and freshwater are RMB 32,491.38, which the court confirms.

2. Crew Wages

The court found that the plaintiff failed to submit evidence of actual payments for the September crew wages as reflected in salary receipts. Consequently, the plaintiff's claim for compensation of these wages lacks factual and legal basis and is therefore dismissed by the court. However, based on the plaintiff's submitted bank transfer records for wages paid to crew members Zheng, Chen, Gao, and Huang (totaling RMB 71,044.87), the court confirms that the plaintiff incurred crew wage expenses of RMB 30,786.11 during the repair period.

III. Loss of Hire

At the time of the collision, SHENG YOU 226 was operating Voyage 2358, which was unloaded. After the vessel was repaired, the plaintiff did not resume operations. Hence, the court deems it fair to calculate the loss of hire based on the average net profit of the four voyages preceding the collision. As shown in the ship's logs, the previous four voyages were Voyages 2354, 2355, 2356, and 2357.

Although the plaintiff submitted August crew wage records, it failed to prove that the crew members worked on Voyages 2352 to 2357 from July 20 to August 21, 2023. The data provided by the plaintiff could not accurately reflect the crew wages for the corresponding voyages of SHENG YOU 226. According to the required minimum crew specified in the certification for continuous 16-hour navigation (14 crew members), an additional cook was required, bringing the minimum crew per voyage to 15. The plaintiff claimed that 18 crew members were onboard in August, leading to increased costs and reduced profits. The court thus calculates the loss of hire based on 18 crew members. Referring to the actual daily wage expenditure of RMB 10,213.52 in August, and factoring in social security, housing fund contributions, and tax deductions for each crew member as reflected in the September payroll of SHENG YOU 226, the plaintiff agreed to a daily wage and meal allowance expenditure of RMB 12,000. The court confirms this calculation.

Based on the fuel supply contract dated July 13, the price of light oil was RMB 7,050 per ton. For voyages after July 31, the price was adjusted to RMB 7,100 per ton. The court recognizes these. Considering all relevant factors, the plaintiff's claimed freshwater price of RMB 22.71 per ton and daily crew wage of RMB 12,000 are accepted by the court, as the defendant failed to provide counter-evidence. The plaintiff's calculation of daily insurance allocation at RMB 329.48 based on the insurance premiums it paid for the ship is also confirmed by the court. Regarding the disputed duration of Voyage 2357, the court determines a 10-day period based on the vessel log's recorded departure time on August 12. Accordingly, the net profit per voyage was calculated as freight income minus operational costs, including port fees (berthing and agency fees), towage fees, crew wages and meals, fuel, freshwater, and insurance expenses. The court thus deems it fair to calculate the loss of hire based on the average net profit of the four consecutive voyages (2354, 2355, 2356, and 2357) prior to the collision.

The average daily net profit of SHENG YOU 226 across these four voyages was calculated at RMB 10,119.72. Therefore, the loss of hire during the 13-day repair period amounted to RMB 131,556.36.

IV. Interest

All compensation claims made by the plaintiff pertain to property damages caused by the collision on August 31, 2023. The court recognizes this date as the commencement of damages. The plaintiff's claim to calculate interest from September 1, 2023, at the one-year LPR published by the National Interbank Funding Center is supported by factual and legal grounds. The court supports this claim. The interest shall accrue from September 1, 2023, until the date specified in this judgment for debt fulfillment.

Key Points of Judgment

1. The liability attribution between the plaintiff and defendant shall adhere to the maritime traffic accident liability determination report mutually recognized by both parties, which serves as the basis for calculating their respective losses.

2. When the parties, after court clarification, waive their right to apply for loss assessment and consent to the court's determination of collision-induced losses based on existing evidence, the court may adjudicate such losses in accordance with legal provisions and the evidence received.

3. If, in the absence of consecutive voyages for reference, the loss of hire is to be calculated based on the average net profit of other corresponding voyages, the court may calculate the loss of hire by reasonably adopting the average net profit of at least four comparable voyages after reviewing their average net profit.

Related Legal Provisions

Article 168 of Maritime Code of the People's Republic of China

Article 4 of Provisions of the Supreme People's Court on Several Issues Concerning the Trial of Cases of Disputes over Ship Collision

Article 3 of Provisions of the Supreme People's Court on the Trial of the Cases of Property Damage Compensation Arising from Ship Collision and Allision